Wider Reform Looks Shaky With Businesses Split On U.S. Border Tax

02/28/2017

With lawmakers in U.S. Congress coming under pressure from some of the nation's biggest employers, major U.S. corporations are going to war in Washington over a Republican 'border adjustment' tax proposal meant to boost exports over imports.

The proposal could be doomed by the political split that is opening, most pronounced in the narrowly divided Senate. And prospects of a thorough tax code reform, a top 2017 goal for President Donald Trump's Republicans, would be diminished if it dies.

Trump has not taken a clear stand on border adjustment. He spoke favorably about it in a Reuters interview on Thursday and has vowed to produce a "phenomenal" tax reform package, without recently offering many specifics.

While ending the deductibility of import costs from taxable income, exemption of companies from having to pay federal income tax on export revenues is the main thrust of border adjustment.

The House of Representatives Republicans, including House Speaker Paul Ryan and tax panel chairman Kevin Brady, is pushing for the broad tax reform "blueprint" and the border adjustment and is a core part of it. The border adjustment is already a sticking point even though the blueprint has not been put into formal legislation.

Concerns about it have been expressed by at least eight Republicans in the Senate. And Republican-leaning states where Wal-Mart Stores Inc is a major employer constitute several of them.

A business coalition working against border adjustment is Americans for Affordable Products and Wal-Mart is a member of it and it includes Best Buy, Costco, Gap Inc, Macy's Inc, Nike Inc and Target among other members.

Republicans could lose only a handful of votes and still be able to pass the blueprint if the Republican-dominated House approves the blueprint and moves it to the 100-seat Senate.

"If it came up today, I couldn't support it," Arkansas Republican Senator John Boozman told Reuters. "That's not to say I couldn't (support it) in the future with modifications."

prices for consumer goods such as cars and gasoline would be raised and he was concerned about that, Boozman said. If border adjustment triggered a global trade war, Arkansas farmers could be hurt, too, he said.

Wal-Mart, the world's largest retailer, is situated in Boozman's state. According to data compiled by the Center for Responsive Politics, a campaign finance watchdog, Wal-Mart and its employees have been among Boozman's biggest backers in 2011-2016.

"The things that are being discussed about the border adjustment tax pose a concern", said that the Wal-Mart Chief Financial Officer Brett Biggs, on a conference call with reporters a week ago.

Also expressing concerns on border adjustment is the Republican Senator Tom Cotton, Boozman's Arkansas colleague. "He supports the goals of tax reform and job growth. But he believes that a new tax on working-class Americans is not the best way to achieve those goals,” said Cotton spokeswoman Caroline Rabbitt.

Georgia Republican David Perdue is perhaps border adjustment's most outspoken Senate critic. He has urged colleagues not to support it and has called the House proposal "a bad idea".